Engineering Services NAICS 541330

Oct 21, 2025 - Weaker Construction and Engineering Spending

• North American construction and engineering spending in 2025 is expected to decline 1% after increasing an estimated 6% in 2024, according to FMI’s fourth-quarter 2025 North American Engineering and Construction Outlook. With a rise of 12%, the sewage and waste disposal sub-sector will lead 2025 nonresidential construction spending growth, followed by religious (10%), water supply (+7%), conservation and development (+5%), amusement and recreation (+4%), public safety (+4%), and transportation (+4%). However, power, highway, and street construction spending is expected to be flat in 2025.
• A new Volcker Alliance report warns that inconsistent and incomplete disclosure of deferred-maintenance liabilities by state governments is masking the accurate scale of U.S. infrastructure decay, estimated at $1 trillion, according to reporting by Engineering News-Record. The study, developed with the University of Minnesota and Pew Charitable Trusts, highlights wide disparities in how states report and manage maintenance needs, with about 20 states lacking public accounting. California and Massachusetts offer detailed inventories, while others, like Oklahoma, do not consolidate data. Pew estimated that state and local governments have about $105 billion in deferred maintenance for roads and bridges, and more than 30 states have a combined $86.3 billion in estimated shortfalls by 2035. The backlog has surged to $370 billion at the federal level, prompting the GAO to flag “Building Condition” as a high-risk issue. Without standardized data, policymakers struggle to prioritize investments, leading to preventable failures and rising costs.

• The 2025 construction outlook signals cautious optimism for the nonresidential and infrastructure segments amid selective growth and macroeconomic headwinds, according to construction software and data firm ConstructConnect. Nonresidential building starts are projected to rise 4.1% over 2024, driven by resilient megaprojects in manufacturing (+38.1%), data centers (+17.3%), and transportation terminals (+ 153.3%), though this momentum may fade by 2026 as planning slows. Institutional construction faces a 6.9% decline, with sharp contractions in prisons and healthcare facilities, while civil construction continues its upward trajectory, led by bridge (+13.5%) and airport runway (+14.7%) investments. Engineering firms will benefit from complex design and planning needs tied to these large-scale projects, especially in manufacturing and infrastructure, but must navigate volatility in tariffs, labor supply, and shifting policy priorities, particularly in power infrastructure.
• In September, consulting firm McKinsey and Co. hosted an infrastructure summit where it released a new report highlighting details of its estimated $106 trillion in global infrastructure spending through 2040, according to Engineering News-Record. A McKinsey senior partner noted that more than 100 infrastructure categories are nested under seven major sectors: transportation, water and wastewater, energy, digital, agriculture, social, and aerospace and defense. Nearly a third of all infrastructure types are relatively new, among them are those areas associated with the energy transition and meeting climate goals. Private investments, including public-private partnerships, are an increasingly significant source of project funding. However, attendees at the summit noted that infrastructure spending growth faces serious challenges, including geopolitical uncertainties, higher financing costs, and evolving US trade policy.